Central government is planning to allow developers of ultra mega power projects to use surplus coal from allocated blocks for other projects in which they hold majority stake. The coal ministry, which is in the process of drafting a policy on use of surplus coal, will soon seek the law ministry's views on the proposal, a government official said. The suggestion to allow companies to use excess coal for their other projects was first put forward by a ministerial panel in January 2010.

Power project developers NTPC and Jindal Power say the move will lead to reduction in electricity tariffs. There are 12 more ultra mega power projects in the pipeline.

"We have suggested that such diversion of coal to other projects run by the qualified bidder should be allowed if the company agrees to a set of stringent conditions. Developers should continue to hold majority stake in the other power project to which coal is being diverted. We have also suggested that the surplus coal can only be used for generation of electricity by the successful bidder or its subsidiary," the official said.

At present, coal ministry guidelines require companies to sell surplus coal from captive blocks to the nearest subsidiary of Coal India at the cost at which it has been mined. Blocks of several companies that did not comply with the norm have been de-allocated in the past.

A Jindal Power official said the move would make ultra mega power projects more attractive, thus leading to low electricity tariffs.

"The move, unlike earlier, would benefit all bidding companies," a director on the board of NTPC said.

The government had come under criticism for allowing Reliance Power to divert excess coal after meeting the requirement of the Sasan ultra mega power projects to its 4,000 mw project in Chitrangi district. The decision was challenged by Tata Power in the Delhi High Court, which dismissed the petition saying the company had withdrawn at an earlier stage of the bidding. The case is now with the Supreme Court. Reliance Power has also sought the government's permission to use surplus coal in mines attached to the 4,000 mw ultra mega power project at Tilaiya in Jharkhand.